What "The Big Short" Missed about the 2008 Mortgage Meltdown

The Academy Award-winning and Oscar-winning film “The Big Short” received praise from audiences and critics alike, and for good reason – it did a commendable job explaining the 2008 mortgage crisis in a digestible and entertaining format. While the film was able to demystify many complex financial concepts and provide a general overview of exactly what happened, it still fell short in explaining some of the more nuanced reasons behind the crisis and why so many people, both on and off Wall Street, didn’t see it coming.

First, the film actually overstated the complexity of the crisis. The 2008 financial crisis was just the latest in a long list of financial crises that have happened throughout history. Ultimately, the complexity of the products people invested in this time around didn’t matter – the basic problem was a mania financed by risky leverage. Yes, there were many complex factors that led to the crisis that the film attempts to explain, but the bottom line is that its nothing new.

Second, the crisis was largely caused by cluelessness, not malice. Throughout much of the film, they seem to get this right, but by the end, the film delivers the message that the system is ultimately rigged and that nothing about that will change. While this type of message surely resonates with the millions of Americans still reeling from the crisis, it is too simplistic – it misses many of the less malicious but more compelling reasons why the crisis occurred.

There’s only so much that can be explained in a two-hour movie, however.

Read Greg Ip’s analysis of the subject online via the Wall Street Journal.

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